The shares of this large-cap company surged by over 6 percent in the last two trading sessions. This is followed by a strong upside potential given by the leading global brokerage, Morgan Stanley. In this article, we will discuss more about the details.
With a market capitalization of Rs 1,84,713 crores, the shares of Grasim Industries Ltd are currently trading at Rs 2,714 per share, down by 5.61 percent from its 52-week high of Rs 2,875.45 per share. Over the past five years, the stock has delivered a return of 354.87 percent.
What did Morgan Stanley quote?
Morgan Stanley has upgraded Grasim Industries to “overweight” from “equal-weight,” and lifted its price target on the shares to Rs 3,500, signalling an upside of 34 percent from its previous day closing price of Rs 2,608.50. The brokerage has made Grasim its first pick, supported by several factors that could enhance stock performance over the medium term.
Morgan Stanley stated that one key catalyst is solid momentum of Grasim’s paints business, which has taken considerable market share and surprised against “very low initial expectations”. While it may not fully achieve its Rs 10,000 crore revenue target by FY28, Grasim looks to be positioned as the third-largest player in the segment. Morgan Stanley raised its valuation on the paints vertical in the sum-of-the-parts analysis materially from Rs 150 to Rs 360 per share.
Further drivers to support the shift are steady growth from underlying existing core segments such as chemicals and viscose, and an impressive trajectory of earnings from UltraTech that will continue to generate multi-year earnings growth arising from cost efficiencies and share migration. The brokerage noted the holding company discount for Grasim has largely collapsed and could collapse further as the “identity” and trajectory of the paints business scale, and further support the re-rating of the stock.
Financial Highlights
The company reported a revenue of Rs 1,48,478 crores in FY25, up by 13.36 percent from its FY24 revenue of Rs 1,30,978 crores. Coming to its profitability, it reported a net profit decline of 22 percent to Rs 7,756 crores in FY25 from Rs 9,926 crores in FY24.
The stock has delivered an ROE and ROCE of 4.07 percent and 7.60 percent respectively, and is currently trading at a P/E of 48.75x as compared to its industry average of 53.59x.
Grasim Industries Ltd is a member of the Aditya Birla Group, with interests in fibres, chemicals, building materials, textiles, and financial services. It produces viscose staple fibre, caustic soda, specialty chemicals, and cement.
Through the Birla Opus brand, it is involved in decorative paints, as well as through its painting services brand, PaintCraft. The textile business includes Linen Club and Soktas. Grasim also provides a non-banking financial company (NBFC), insurance, and asset management services.
Written by Satyajeet Mukherjee
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